New Delhi: Fearing Chinese attempts to scuttle a bid by state-run ONGC Videsh Ltd (OVL) to buy ConocoPhillips’ 8.4% stake in Kazakhstan’s Kashagan offshore oil field, India is stepping up its efforts in support of the state-owned company.

OVL had been expected to complete the deal to pick up the stake in the world’s largest hydrocarbon development project, which is valued at around $187 billion, by the end of June. The deal is worth some $5 billion.

With 2 July being the deadline for the Kazakhstan government to either buy the shares on offer or approve the stake sale, Prime Minister Manmohan Singh may call Kazakhstan president Nursultan Nazarbayev and write to him championing OVL.

“The Chinese influence is there. But there is no mathematical formula to capture whose influence is greater or smaller," a person aware of the efforts said on condition of anonymity. “We as a country are trying the best to get the job done. It is being dealt at the highest level within the Indian government."

OVL was expected to close the deal for the US-based oil producer’s interest in the North Caspian Sea production-sharing agreement in the first half of 2013, Oil and Natural Gas Corp. Ltd (ONGC) said in a November 2012 statement.

The Prime Minister’s office, the foreign affairs ministry and the Kazakhstan embassy in New Delhi didn’t respond to queries emailed on Wednesday.

“We are very keen for this deal and are seriously engaged at appropriate level with the government of Kazakhstan," petroleum minister M. Veerappa Moily said in response to a question whether Singh had spoken with Nazarbayev. “A decision is expected by 2nd of July, which we are keenly observing and are hopeful that the decision goes in our favour."

The Kazakh government and project partners have the right of first refusal on the sale, according to ONGC.

The partners in the project include Exxon Mobil Corp., Eni SpA, Total SA, Royal Dutch Shell Plc. and KazMunaiGaz, each of which have a 16.81% participating interest, and Inpex Corp. with a 7.56% stake. OVL already has a presence in Kazakhstan with a 25% stake in the Satpayev oil block in the Caspian Sea.

“We have a 50:50 chance," said an official in India’s petroleum ministry, who didn’t want to be identified. “There is a rumour that China wants the Kazakhstan government to exercise the right of first refusal, buy the stake and then sell it to them. Let’s see what happens."

Kashagan holds an estimated 30 billion barrels of oil, of which 8-12 billion barrels are potentially recoverable.

“At one stage, it (Singh’s intervention) was considered. I don’t know what happened," said another official in the petroleum ministry, also requesting anonymity.

“We have heard that China is very active. It depends on the relationship between the two countries (China and Kazakhstan). We know that the heads of these two governments have been in constant touch and have had good relationship," this person said. “In this regard, with 2 July being the cut-off date, we thought that this opportunity should be pursued from the top-most level in the Indian government and hence the highest level in the government was approached for the same."

ONGC is trying to secure overseas assets as India’s energy demand gallops. India’s energy requirements are expected to more than double by 2035 to around 1,500 million tonnes of oil equivalent (mtoe) from less than 700 mtoe now, according to oil ministry estimates.

An ONGC executive, who didn’t want to be named, also expressed concern. “We are aware of Chinese interest. We are making efforts from our end."

Countries such as India that are dependent on imports to meet their oil needs are particularly vulnerable to supply shocks. India is therefore seeking to build up energy assets worldwide.

India, the world’s fourth largest energy-consuming nation, imports 80% of its crude oil and 25% of its natural gas requirements. It trails the US, China and Russia, accounting for 4.4% of global energy consumption.

“In competitive and transparent hydrocarbon asset markets, decisions on who will get the share of a contract on a particular asset will be based entirely on the technological, commercial and more recently safety and environmental merits of the bid," said Lydia Powell, who heads the Centre for Resources Management at New Delhi-based think tank Observer Research Foundation. “But in Kazakhstan, political influence could play a role as it is not among the more competitive hydrocarbon asset markets in the world."

“Many of Kazakhstan’s influential leaders are reported to be involved in swaying oil deals one way or the other. There is interest in Indian bids from some in the oil sector in Kazakhstan to counter the growing influence of Chinese oil companies in the country," Powell said. “In this context, the Prime Minister’s personal involvement could play a positive role in OVL’s bid."

Elizabeth Roche and Liz Mathew contributed to this story.

Close